This handy savings calculator from Lifetuner.org helps you answer that question. Just plug in a yearly savings amount (like $200/month = $2400/year), the ages you start and stop investing, your desired retirement age, and an interest rate. For this last assumption, I would use 6.8% (or 7% if decimals are too much to handle) to match the historical, real (inflation-adjusted) stock market return. That way you won’t fool yourself into thinking you’ll have more purchasing power (which is what matters) than you really will have.
You can run up to three side-by-side simulations. Compare starting ages, amounts you save, or the difference due to small interest rate changes. This is a great calculator for estimating the return from regular investing, or the difference in gain from, say, a 0.5-1% increase in return due to switching to low-fee index funds, which beat the returns from (higher-fee) actively-managed mutual funds 70 – 80% of the time.
You can use this to calculate ANY regular investment, not just one for retirement. For example, if you want to have a house downpayment in 3 years, assume a bond fund return of 3-5% (rates are low today) and then see how much you’d need to invest yearly to achieve your goal. The longer you can wait, the more you’ll have.
Or, to calculate savings for your kid’s college (new parents, pay attention!), enter your kid’s current age as the ‘start saving’ age and 18 as the ‘stop saving’ & “retirement” ages. (“Retirement” in this calculator just means the date when you want to know how much you’re investment will be worth.) Use the historical, real, stock market return of 6.8% if you have a long time (>5 years) to invest, since that’s where your college savings should be.
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